UPDATE 1-German firm Friedrich Vorwerk plans IPO to expand in hydrogen market

(Adds valuation)

FRANKFURT, March 8 (Reuters) – German energy infrastructure firm Friedrich Vorwerk plans an initial public offering (IPO) on the Frankfurt stock exchange in the first quarter to accelerate growth in the hydrogen market, its biggest shareholder said on Monday.

The company, a subsidiary of industrial firm MBB, aims to raise about 90 million euros ($107 million) from newly issued shares as well as shares from existing owners.

The listing could value Friedrich Vorwerk at 800 million to 1 billion euros, three sources close to the deal said.

The company declined to comment on the valuation.

MBB said the hydrogen and electricity businesses were expected to benefit from “substantial investments in light of the clean energy transition”.

Germany has started large-scale efforts to develop ‘green’ hydrogen, which is produced from water by electrolysis using renewable power generated by wind, solar and biomass.

The technology, which is also being pushed by the European Union, aims to develop alternative fuels for industry, energy, transport and other sectors as part of the country’s decarbonisaton strategy to meet climate targets.

Vorwerk, in which MBB has a 66% stake, specialises in pipeline, cable and plant construction for the gas, electricity and hydrogen markets. It posted earnings before interest, tax, depreciation and amortization of 58.6 million euros in 2020 on sales of 291.2 million euros.

Peers such as Neles, Alfa Laval and Weir trade at 14-15 times their core earnings. If Vorwerk secured a similar multiple, it would reap a 850 million euro valuation in a potential IPO.

Vorwerk would remain an owner-managed business, with Chief Executive Torben Kleinfeldt and MBB retaining a significant stake in the company, the statement said.

The remaining stakes in Vorwerk are owned by Irene Vorwerk, widow of the founder and Kleinfeldt.

Vorwerk has a sales pipeline with large potential order volumes from new underground electricity transport lines Suedlink, Suedostlink and Corridor A-Nord as well as a number of planned hydrogen electrolyser plants and pipelines.

Berenberg and Jefferies are organising the deal with the help of Hauck & Aufhaeuser.

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